Almost a quarter of a million couples with children are pretending to live apart to claim lone parent benefits worth up to £7,100 a year, according to a report by The Marriage Foundation.
The organisation found a discrepancy of 240,000 between the Office for National Statistics’ figure on the number of lone-parent households in England and Wales, and the number of people in receipt of one-parent benefits.
The foundation, set up by the High Court judge Sir Paul Coleridge to reduce from 500,000 the number of people drawn annually into the family justice system, said the tax rules had created a serious financial penalty for couples who stayed together.
Harry Benson, the report’s author, said: “It is indefensible that parents in committed, stable relationships face such significant penalties for staying together, to the extent that some pretend to be separated to avoid them.
“Those couples who have not made the decision to commit to each other will be strongly dissuaded from doing so by the tax system.
“It is irresponsible for the government to continue this disincentive to make relationships work. They should be striving to encourage solid relationships, which are key to avoiding expensive social problems further down the line.”
Co-habiting couples who wrongly claim the lone parent tax credits can gain up to £7,100, rising to £9,985 for those with two children, or £11,917 for those with three. In his autumn statement in November, George Osborne, the chancellor, is expected to announce a tax break of £150 for married couples, but the Marriage Foundation says it will be too little to make a difference.
Instead, it wants to see a tax break of £2,000 a year for married mothers with a first child under the age of three, because couples are most likely to break up in the early years. Although that would cost the exchequer £1bn a year, Benson argues the scheme could become cost-neutral as family stability increases and the temptation to pretend to live apart diminishes.
HM Revenue &Customs said it was aware of the problem of undeclared partners perpetrating tax-credit fraud, and was combating it.
“Last year alone we carried out 120,000 checks on undeclared partners, and are continuing to explore ways that we can more accurately identify those falsely claiming to live alone,” it said.